The Power of Daily Deal Sites

The rapid growth of “daily deal” websites like Groupon is truly exceptional. It seems like every time I turn my head to grab the mouse, there is a new ad for another social “deal of the day” or coupon website asking me to register.

The list is vast – Groupon, Morgan’s Deals, Living Social, Facebook Deals, along with an array of small targeted groups and local organizations starting their own daily coupon offers.

This platform has proved effective for many small merchants, especially in retail and foodservice businesses.

So, what are the pros and cons of participating in social/daily deal websites?

We have a few customers who have successfully participated in Groupon and similar sites to promote their businesses. I have observed a few things so far.

Pros – Instant Exposure.

One of our clients, RockBody, has participated in Groupon and other deal websites several times to offer significant discounts on their fitness boot camps in Austin. They continue to participate because it has worked well for them, increasing their new customer base by hundreds and allowing them to quickly spread the good word about their business and grow to over 20 locations. This is a success story for social deal sites.

Cons – Overwhelming Flood.

But I have also seen some businesses struggle with the sudden flood of new customers they need to manage. If they are not equipped to handle the surge, the customers (both new and former) can get frustrated and even give bad reviews of the business. One photography company that advertised on a daily deal website for the first time realized it could not handle the hundreds of phone calls coming into their office to book appointments. Some people who purchased the deal were upset because they could not get through to schedule anything, and the staff at the photography studio spent long hours at night replying to tons of extra emails. Eventually, the merchant had to extend the deadline on the coupon to allow all the customers to book into the following year.

To Be Determined – Business Type Limitations.

What I have observed so far is that these “deals” seem to work best for businesses in a retail or food service environment. They also are popular when new businesses come to town (to get the word out quickly). I do not see a place for business-to-business services on these sites yet. Similar to direct mail coupons, the most popular “deals” are business-to-consumer.  But this marketing method is still young, and more variations of these websites are still popping up – I will stay tuned.